The slowdown of Pakistan’s large-scale industrial sector is a cause for concern, adding to the myriad issues that the economy is already confronted by. Given that the rest of the world is also seeing contracting industrial production, the blame for this problem would normally not be placed with the government. The Global Manufacturing PMI (Purchasing Manager’s Index) has indicated a contraction of the international manufacturing sector for the last four months since May, with countries such as Germany fearing an impending recession. The secondary industry is currently contracting the world over, but for Pakistan, the problem gets magnified due to our reliance on imported raw materials, the devaluation of the rupee and the effect this has on the cost of production. Inflation and industry contraction are the only two possibilities as a result.

The government’s policy of a market-based exchange rate and high energy tariffs is making the problem worse for Pakistani manufacturers compared to their international competitors. With a wide range of industries – from the automobile sector to the pharmaceutical – posting negative growth, the government’s hope of a turnaround in the near future, with increased private sector investment seems to be a pipe-dream, given that the ruling party has also increased interest rates, making conditions for investment unfavourable.

The key takeaway from this complex situation is that the global economy is facing a shrinkage and market leaders fear an impending recession. Pakistan’s economy was already in the doldrums and the government’s policies have only opened us up for bearing the worst of a recession – if it does come to pass – because with levels of inflation already above the international average, any global recession is likely to completely destroy what’s left of our economy.

The government however, has its hands tied, with stringent IMF conditionalities to meet. The recently concluded visit from IMF officials gives reasons for the beleaguered economic team of the government to breathe a momentary sigh of relief; the IMF delegation believes the government has made a positive start towards implementing its programme. The actual progress review comes next month, and the government still has a lot more to do before the IMF gives its complete approval. This approval is what’s important in the current environment; if Pakistan can fulfil IMF requirements, it sets itself up for financing from other sources as well. That might help us survive a global recession if it does come to that. There are too many variables in play to attempt to predict what comes in the near future. The government has taken hard decisions that has damaged the economy in the short run in some respects, now it must look to offset this through other means.